Some U.S. execs make big noises about U.S. innovation — but look overseas for new ideas.

By Ryan Underwood3 minute Read

Council on Competitiveness

National Innovation

Initiative Summit

December 15, 2004

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As talking-head fests go, the Council on Competitiveness’s Washington, DC, confab on recapturing America’s innovative edge scored high on the glitz scale. The venue was the swank new Ronald Reagan Building, where President Bush was hosting an economic summit of his own just across the hall. The crowd was VIP-only. Perrier and smoked salmon canapes flowed freely throughout the morning.

Amid the pomp, a slew of heavy hitters from business, academia, and government — everyone from former MIT president Charles Vest to Massachusetts governor Mitt Romney to General Motors CEO Rick Wagoner — settled into oversized chairs to wax insightful on the findings of a 15-month study by the Council’s National Innovation Initiative.

“A nation that was founded on restlessness, the pioneer spirit, exploration, innovative ideas, self-government, and risk taking is now somehow losing its edge at just the wrong time,” IBM chief Sam Palmisano intoned in his opening remarks. “So we committed ourselves to do something about it.”

A stream of similarly profound-sounding but abstract sentiments produced a full five hours of concerned nodding from the sea of balding heads. As one grave observation led to another, though, a disturbing disconnect emerged. While these corporate sages imagined jump-starting American innovation, comforted by one another and the catered buffet, something quite different was going on in the reality of the global economy.

In Beijing, just as Palmisano was opening the event, executives from China’s Lenovo Group Ltd. were wrapping up a meeting with analysts to discuss their acquisition of IBM’s personal-computer division eight days earlier. As Jerry Sanders, cofounder of Advanced Micro Devices Inc., was warning that America “just has to move faster than everyone else,” his company was announcing a deal to develop next-generation flash-memory technology with Taipei-based Macronix International Co. Ltd. Wagoner’s General Motors had just agreed to let Taiwan’s Yulon Motor Co. make cars under GM brands.

All of which made the council’s event and the NII report — despite its 37 precise and considered policy recommendations — seem little more than a grandly staged but perfunctory exercise in lip service. The CEO heavies mouthed the politic words, but their companies showed that today, innovation isn’t bounded by national borders.

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To be sure, the group’s findings were both substantive and scary. In 1963, United States- based individuals and companies authored 81% of the U.S. patents approved. Today, foreign companies and inventors account for nearly half of those patents. Sweden, Finland, Israel, Japan, and South Korea all spend more on R&D as a share of GDP than does the United States. Attendees agreed on the need for tort and regulatory reform at a time when the nation’s legal costs add up to 2% of GDP. (Johns Hopkins University president William Brody’s appealing solution: “Create lawyer farms. Just like we pay farmers not to grow wheat, we should pay lawyers not to practice law.”) And they puzzled over how to make science and engineering “cool” for schoolkids.

But just as it seemed that the wise men could solve America’s innovation gap, the real world intruded. At the session’s end, Palmisano again took the stage to describe IBM’s own emerging innovation strategy.

In years past, Palmisano said, Big Blue had undertaken research to understand where technology was going next, resulting in a document called the Global Technology Outlook. This year, Palmisano ordered a different sort of effort: Rather than simply identify new technology trends, IBM has opened up the process — inviting governments, universities, and businesses from around the world to present their ideas on where innovation is headed. Call it open-source scenario planning. “This was a very thorough and exhaustive piece of work that will actually change the investment strategy for the IBM Corporation,” Palmisano told the audience.

But what Palmisano left unsaid was this: IBM’s new approach reflects perfectly how innovation really happens today. Talent and ideas are flourishing everywhere — from Bangalore to Shanghai to Kiev — and no company, regardless of geography, can hesitate to go wherever those ideas are. The United States has no more claim on innovation today than the next country — a point hinted at, uneasily, by some of the Washington forum’s participants, but never addressed head-on. Which is why all the high-level brainstorming that morning came off as, at best, beside the point.

At least the canapes were good.

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A version of this article appeared in the March 2005 issue of Fast Company magazine.